1998 (4) TMI 497 - AT - Central Excise

Demand - Limitation - Suppression - Classification - Order - Non-speaking - Appeal to Tribunal - Reference to third member - Show cause notice - Lacunae - Marketability - Burden of proof

Issues Involved:
1. Classification of unprocessed fabrics of cotton, man-made filament yarn, and fiber.
2. Marketability and duty liability of one-sided coated fabrics.
3. Classification of articles manufactured from double-sided coated fabrics.
4. Limitation period applicable for demand of duty.
5. Levy of penalties on the appellant company and its employees.

Detailed Analysis:

1. Classification of Unprocessed Fabrics:
The appellants classified unprocessed fabrics under Chapters 52, 54, or 55, which were exempt from duty, while the Revenue classified them under Heading 5909, which was not exempt. The Tribunal referred to the Simplex Mills case, which classified similar products under Heading 5909, but the appellants argued that the classification should be under Chapter 52. The Board had issued a circular under Section 37B of the Central Excise Act, 1944, classifying similar products under Chapter 52. The Tribunal remanded the matter to the Commissioner to reconsider the classification in light of the circular and the principles laid down by the Supreme Court and High Courts.

2. Marketability and Duty Liability of One-Sided Coated Fabrics:
The Tribunal considered whether one-sided coated fabrics were marketable and thus excisable. The appellants argued that these fabrics were not marketable without further processing, such as embossing and trimming. The Tribunal noted that the burden of proving marketability lies with the Revenue, and since the Revenue failed to provide conclusive evidence, the Tribunal held that the one-sided coated fabrics were not marketable and not dutiable. The demand for the period after the receipt of the letter dated 14-9-89 was barred by limitation.

3. Classification of Articles Manufactured from Double-Sided Coated Fabrics:
The Tribunal examined whether articles like tarpaulins and other products made from double-sided coated fabrics should be classified under Heading 3926 (articles of plastics) or Heading 6301 (made-up textile articles). The Tribunal held that these articles should be classified under Heading 6301, as this heading specifically includes tarpaulins and other similar products. The Tribunal emphasized that the specific description under Heading 6301 should be preferred over the general description under Heading 3926.

4. Limitation Period Applicable for Demand of Duty:
The Tribunal held that the demand for duty for the period March 1988 to March 1991, raised on 5-6-93, was barred by limitation. The Tribunal noted that the appellants had disclosed all relevant information to the department, and there was no suppression of facts with intent to evade duty. Therefore, the extended period of limitation under Section 11A of the Central Excise Act, 1944, could not be invoked.

5. Levy of Penalties:
The Tribunal set aside the penalties imposed on the appellant company and its employees. The Tribunal noted that part of the demand had been upheld as the appellants accepted liability, and the matter was remanded for de novo consideration regarding one-sided coated fabrics. The Tribunal held that the penalty on the company should be reconsidered based on the total demand of duty after the de novo proceedings. The penalties on the two employees were set aside.

Majority Decision:
1. The classification of unprocessed fabrics is remanded to the original authority.
2. One-sided coated fabrics are held to be not marketable and not dutiable.
3. Articles of one-sided coated fabrics are classifiable under Heading 63.01.
4. Articles of double-sided coated fabrics fall under Heading 63.01.
5. The demands at issue Nos. 1, 2, 4, and 5 are held to be barred by time.

← Previous Next →